With the long-awaited Ethereum merge rapidly approaching and the U.S. Treasury Department sanctioning coin mixer Tornado Cash earlier this month, blockchain technologists are growing more concerned that regulations may have an impact on Ethereum’s core functionality and its post-merge proof-of-stake consensus mechanism.
In response to a hypothetical scenario, Brian Armstrong, CEO of Coinbase, stated on Twitter today that his company will halt its Ethereum staking service in the event of regulatory threats in order to protect the integrity of the blockchain network.
Lefteris Karapetsas, the creator of the open-source crypto analytics and accounting tool Rotki, presented the question on Sunday. Karapetsas challenged a number of significant Ethereum players to pick between two choices if governmental authorities required that they censor particular addresses.
Question for @LidoFinance, @coinbase, @krakenfx, @stakedus, @BitcoinSuisseAG
If regulators ask you to censor at the #ethereum protocol level with your validators will you:
A) Comply and censor at protocol level
B) Shut down the staking service and preserve network integrity https://t.co/UYVR2L6tB1— Lefteris Karapetsas | Hiring for @rotkiapp (@LefterisJP) August 14, 2022
As of this writing, Armstrong is the only representative of one of the companies mentioned in the scenario who has responded, speaking on behalf of Coinbase. He replied:
“It’s a hypothetical we hopefully won’t actually face. But if we did we’d go with B I think. Got to focus on the bigger picture.”
He pointed out that there might be a better third choice or that a legal challenge might help attain a better end.
Armstrong’s response is particularly noteworthy given that Coinbase considers its lucrative staking service to be a “huge win” for the business and is relying heavily on it for its future. And just last week, JPMorgan analysts wrote in a note that Coinbase and its shares (COIN) should benefit from the Ethereum merger due to the company’s Ethereum staking service.
